Training and Enterprise Councils

This debate must be placed in the context of decisions made in the 1993 Budget, when the Chancellor of the Exchequer announced proposals to cut £500 million from the Department of Employment's programme over the next three years. The training and enterprise councils' national council immediately announced that would inevitably lead to training cuts of between 10 per cent. and 28 per cent. [Interruption.]

I am grateful to my Front-Bench colleagues for emphasising the extent to which last year's cuts in training places severely damaged TEC programmes throughout the country.

One year later, the knock-on effects that are part and parcel of the Government's retreat from training are also clear. The sum of £170 million was cut from training for work projects. As a result, this year there will be 55,000 fewer adult places in that programme.

TEC budgets around the country have collapsed. Calderdale and Kirklees have lost £7.5 million, or 25 per cent. of their training budget. Staffordshire lost £7 million, Teesside lost £6.5 million, Merseyside lost £15 million, and Devon and Cornwall lost £11 million.

The Minister might argue that such cuts represent progress rather than being a retrograde step. I suspect that his response will have three themes. One will almost certainly be a repetition of the argument made by the Secretary of State for Employment in the 1993 Budget debate, when he said that
TEC budgets are being determined by outputs—by what is achieved—rather than by what is spent."—[Official Report, 1 December 1994; Vol. 250, c. 1360.]
That is the "output, not input" argument.

The second defence will elaborate on that theme, with the claim that setting a target of 40 per cent. of trainees securing jobs marks another improvement. The third will be that 27 per cent. of trainees should be drawn from the disadvantaged—refining the quality of aid rather than stressing the quantity. The problem is not the aspirations behind targeting but the emptiness of the programme, which makes the Government's position dishonest.

We are invited to forget the cuts and to accept that there is an improved targeting regime that is the best of all worlds for the best of all programmes. Even the most cursory examination of the programme reveals that the underpinning of that argument is a lie, a folly and fraud.

I will support my claim with the example of the TEC that I know best, which is the one in Greater Nottingham. Other hon. Members will, no doubt, refer to their own areas. This year, a cut in Greater Nottingham TEC's budget from £20 million to £17 million has been announced. In Government terms, that is a mouthwatering and modest 15 per cent. reduction, but in relation to the achieved spending last year it amounts to a cut from £24 million to £17 million, which makes it a cruel and cynical 30 per cent. reduction.

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The immediate impact on staffing is even harsher. The TEC has been compelled to reduce its staff from 75 to 47—a cut of 38 per cent. The Minister might argue that when unemployment falls, one can expect a commensurate cut in programmes that address the needs of the unemployed and long-term unemployed. In Greater Nottingham's TEC catchment area, 30,000 people are unemployed, 18,000 of whom are long-term unemployed. Unemployment in the city is 16 per cent. For those 18,000 long-term unemployed, the TEC will be able to deliver no more than 800 training places.

The hon. Gentleman paints a distorted picture because he does not take into account the Government money that is being ploughed into Nottingham through the city challenge project. Is not that going a long way to help training schemes and the people in that area?

I will deal with that point later, but Nottingham's experience of other Government training programmes is that increasingly they are turning into a dog's breakfast of non-co-operation between Departments and cynical manipulation of funding, to deny the city money for bids that are among the best in the country. I will address the role of civil servants in that cynical process of stealing money from meretricious projects.

TECs were flagged up as the centrepiece of Government training initiatives. If one focuses only on the long-term unemployed in Nottingham, one sees that at the current rate of funding it will take more than 22 years for this year's long-term unemployed to gain access to a training place. It may seem capricious of the Government to approach training in such a way that many long-term unemployed are likely to have an entitlement to retire before they are given a right to training. That is hardly the brightest picture of the dynamic market economy that the Government like to paint.

The Government may argue that although there are many long-term unemployed in Nottingham, they are not among the most disadvantaged in the country, but we must look a little closer. Of the gross unemployment figure, 48 per cent. of long-term unemployed in Nottingham are Afro-Caribbean. The city is home for 37 per cent. of all ethnic minority communities in the east midlands. A study of disadvantaged areas in Nottinghamshire showed that, of all of the wards in the county, 14 of the worst areas were in the city itself, in the area covered by Greater Nottingham TEC.

It may be argued that Nottingham is part of an underlying upward trend and that people will find their own prospects of employment. I refer those who want to hide behind that argument to the 1994 urban trends report of the Policy Studies Institute. In relation to employment change over the past decade, it says:
Leicester and Nottingham … suffered the general decline in the proportion of full-time employees but did not share in the general increase in part-time employment—in Nottingham it actually declined.
That is hardly a picture of a dynamic expansion of work opportunities.

What about discrimination? Every TEC and trainer in the country says that all the evidence shows that the area of greatest resistance in taking on the long-term unemployed is among small and medium-sized enterprises. Those enterprises are not necessarily being run by people who are deeply prejudiced. It may simply
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be that, in terms of this leaner, fitter Britain, many of them are running on the bare bones. The problems—getting the long-term unemployed back into work—which those enterprises and trainers understand, require considerable personal and financial support. If that is so, one must devote additional resources where there are a disproportionate number of small firms in an economy.

In the Greater Nottingham area, some 15,000 enterprises offer employment on different scales, but 93 per cent. of them employ fewer than 25 people. That is the marketplace in which the long-term unemployed must be placed if they are to have job and career prospects. The support needed to deliver stable and workable training programmes for those people is greater because of the propensity of the city to be dependent on small and medium-sized enterprises. Just when we have the greatest problems and the biggest backlog of difficulties in meeting the needs of the long-term unemployed, the training budget is cut by 30 per cent., and support and staff by 38 per cent. That nails the lie to the Government's argument about a serious commitment to training.

The farce is that underfunding of training turns programmes into cruel jokes. Nationally, we know that 58 per cent. of youth trainees leave training schemes early. Fewer than half are in full-time work. Only one in 20 gets part-time work, and one in two leaves without a qualification. Instead of investment to raise standards and qualifications, cuts are made, which turn farce into fraud. I say that because there is great pressure among TECs simply to look at the outcomes that are required and to tailor the "masquerading" of training into meeting targets that simply deliver the cash. We know already that training providers have fiddled qualifications to secure funding. We also know that there is great pressure—it is recognised in the TECs themselves—to train only the trained. If the trigger point for funding is a qualification, there is growing pressure to look for people who already have qualifications, who can be put through quickie courses to meet the next stage of a national vocational qualification, thereby releasing money.

The problem is that that creates a cynicism gap in the programme. That gap is not being filled by genuine training schemes for people with special needs, who face long-term prospects of unemployment. We know that the least qualified—the most vulnerable people in the work force—have extra needs that can he met only by extra costs and extra support. Instead, TECs will he under pressure to provide short courses that lead to junk jobs. What we will see—and I have talked this through with the TECs—is that a number of employers will come up with offers for TECs to meet the target needs by offering the most cynical employment contracts or opportunities afterwards: short-term contracts, irregular hours, perhaps even finding ways of getting zero-hour contracts recognised as a job without work. The most vulnerable people outside the work force will be cynically exploited simply to trigger the cash to keep training programmes on the road.

In many ways, the new rules also reward underactivity and underperformance. The TECs that have spent their budgets on delivering training are precisely the ones that are most vulnerable to cuts. They have no reserves left to cushion cuts from one year to the next. Nor do they have the cushioning needed to do precisely what the Government often ask them to do: to get into partnership funding, whereby they have to provide matching moneys.

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This is particularly important in relation to European funding. Without a cash reserve, a TEC will not be in a position to offer matching funding as part of the more generous offers of additional project-based activities, to which the Government will often lay claim. The TECs that are doing the most will be the most vulnerable to punitive cuts in their funding.

This country is systematically short-changing the unemployed. The average time that an adult receives on a skill-training course in the United Kingdom now amounts to just 20 weeks—the shortest in Europe. It does not surprise me that we see stories in the papers about hospital porters being asked to help in hip operations. We are systematically short-changing ourselves not only in the skill training that we offer but in the job security and the proper staffing needed to run the services in which we are supposedly training people to work.

The United Kingdom is also the meanest of funders around Europe. If we compare the United Kingdom, France and Germany, we can see that, in relation to labour market training as a percentage of gross domestic product, the United Kingdom spends 0.14 per cent., France, 0.39 per cent.—two and a half times more than the UK—and Germany, 0.55 per cent., which is four times as much as the UK. For the entirety of its training budgets, the United Kingdom spends 0.5 per cent, France, 1 per cent. and Germany, 1.6 per cent. This country spends less than half the average for all EC and EFTA countries on training programmes. It is little wonder, therefore, that the chief executive of the Greater Nottingham TEC should write to the Secretary of State, warning him that he is in danger of creating two-tier TECs, where only those that have cash reserves can prosper, whereas those that do not, but have been delivering decent training programmes, are in danger of being driven to the wall.

This country needs a complete rethink of our approach to training the unemployed. First, we need a commitment from the Government that they will restore funding to training programmes. I say that at a time when the country knows, even though the Government will not admit it, that the Chancellor sat on a windfall bonanza income last year when constructing his Budget. Rather than investing that money in training the unemployed he has been stuffing it in his pockets to facilitate a "bung" Budget before he makes a dash for the next general election.

Secondly, we must restore local accountability. Elected representatives of local authorities must have a say in the shaping of local training programmes. The transfer of responsibilities to unelected civil servants has been a disaster.

Thirdly, bureaucracy must be reduced. The delivery of training is now in a dreadful mess, not only in my area but throughout the country. The granting of arbitrary powers to various civil servants, allowing them to create mayhem, is a cynical joke.

I am currently dealing with the case of a young person who is on a training course to become a joiner. The college says that he will pass with flying colours; the Benefits Agency has supported him. Unfortunately, the Department of Employment has subjected him to considerable pressure, telling him that unless he takes a course in office skills his benefits will be cut. When he asked about that course, he was told that it mainly involved answering the telephone. He pointed out that he was training to become a joiner and did not envisage spending much time on the office telephone, but the
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Department was adamant, and has now reduced his benefit entitlement because he would not go on the office skills course. There are similar absurdities throughout the country: I am sure that other hon. Members can give examples, both absurd and tragic, of the way in which the system is falling apart.

Finally, we must restore a system in which local needs are targeted. Areas must be able to identify realistic job opportunities—examining the specific needs of their labour forces and labour markets—and find ways of tackling the backlogs caused by discrimination and disadvantage. The system must be locally accountable, rather than being run by unaccountable civil servants and bureaucracies.

I cannot describe my anger at the way in which the country and the Government have treated the unemployed. Those who currently have almost nothing can expect to receive even less.

This debate is taking place at a time when the press seems obsessed with the notion of "outing". Let me tell the Secretary of State and the Government that they themselves cannot expect to remain immune from such "outing" much longer. They have produced a succession of policies that have amounted to little more than a belief in getting their leg over the long-term unemployed: they certainly have not been giving the unemployed a leg up into decent jobs.

Perhaps it is sufficient to say that the Government's policies have been less than helpful in returning the long-term unemployed to secure and prosperous jobs. Before too long the Government will find themselves being judged by the public: they will be "outed" in the most responsible way that I can imagine—at a general election, when the public will "out" the lot of them.

My area contains the Southern Derbyshire TEC, and abuts the area containing the Greater Nottingham TEC, about which the hon. Member for Nottingham, South (Mr. Simpson) has spoken. I must tell him that I do not share his pessimism about training and the job that TECs do: I believe that TECs do an excellent job, and my belief is confirmed by the experience of all who are involved with Southern Derbyshire TEC.

It is not only the Government's function to fund training; it is the function of employers as well. When I ran a company, before the advent of TECs, we organised and paid for the training ourselves.

Does the hon. Lady support the cut of nearly £2 million in Southern Derbyshire TEC's budget in a single year? Does she approve of the fact that training in her area has been cut by 9 per cent. in one year?

I am aware of those figures, and I shall deal with the hon. Lady's points shortly. If she will restrain herself for a moment and allow me to deal first
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with Greater Nottingham TEC, I shall deal with Southern Derbyshire TEC a little later—and perhaps reveal another set of figures that may prove an eye-opener and make the hon. Lady wish that she had not intervened.

Who pays for training, who receives it and who benefits from it? Those issues involve a group of people and organisations. Let me inform the hon. Member for Nottingham, South that it used to be common for companies to pay for their own training; the advent of TECs has considerably assisted both those companies and the people who require training—people who are either working for the companies concerned or trying to improve their skills in order to enter the jobs market.

The hon. Gentleman mentioned the length of courses. He should hesitate before deciding that long training is good training. When I was involved in training, I found that one of the difficulties was persuading young men, in particular, to remain at the college for any length of time. They wanted to learn their skills as quickly as possible, leave the college and the day-release courses and return to full-time work. Making courses too long does such people a disservice; flexibility is the key word. Training must meet the abilities and aspirations of those involved.

Before the debate, as my TEC is adjacent to that of the hon. Member for Nottingham, South, I looked up the most recent report of Greater Nottingham TEC. The chairman introduced the report with a statement that strikes me as considerably less pessimistic than what we have heard this morning:
As Nottingham starts to emerge from recession, GNTEC has streamlined and rebuilt its operation … we now have the right team and the right partners to position Nottingham as one of the country's foremost regional centres.
That implies that the chairman is looking ahead positively.

The hon. Lady knows a good deal about the Greater Nottingham area, and about training in the east midlands generally. She has quoted the chairman of the Greater Nottingham TEC. Does she subscribe to his view that a £3 million cut in the budget was a retrograde step, and that the Secretary of State for Employment should reinstate the former budget?

That is an interesting intervention. The hon. Member for Nottingham, South gave a different set of figures; perhaps he and his hon. Friend should discuss the matter.

Let me point out to the hon. Member for Sherwood (Mr. Tipping) that unemployment is falling substantially in both Nottingham and Derbyshire, which has benefited all who live and work there. Both TECs are becoming involved with other organisations, and gaining access to funds from organisations outside Government—and, in the case of the Greater Nottingham TEC, funds from Europe. Employers are funding more training in the areas. We should consider the funding of training in a wider context and examine the consequences of training, the way in which people benefit and the number of jobs that are being created in both our areas. Again, the hon. Gentleman will recognise that those issues are touched on throughout the Greater Nottingham TEC report, as is the number of long-term unemployed people whom the TEC is getting back into work. The figures are an excellent recognition of the quality of its work, the sort of funds that it is levering out of organisations now and the sort of funds that it is hoping to lever out in future. He and I are looking at something of a success story across our part of
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the east midlands, with that region being hailed as the strongest-growing region in the country. It is a significant success story, to which the TECs are contributing.

I should be grateful if the hon. Lady would simply accept yesterday's statement by Greater Nottingham TEC. It states that the cuts that it is having to deal with lead, first, to a serious undermining of the quality of training that it feels it can deliver, secondly, to the almost complete erosion of the basis on which it is able to lever additional funding because of the lack of reserves, and, thirdly, to the most enormous questions being raised about the partnerships that it is able to enter into with the private sector in relation to special needs training of people who have been out of the work force the longest.

I too have a concern about partnership funding and the way in which that helps local economies. I am aware that Southern Derbyshire TEC did very well in obtaining additional funds to assist specific groups, such as those that the hon. Gentleman mentioned, because it had exceeded its targets, whereas Greater Nottingham TEC was not as well able to perform against its targets and, therefore, did not receive the additional funding that it needed for those priority groups. In relation to those specific groups, the message to Greater Nottingham TEC is perhaps that it should consider what Southern Derbyshire TEC did to benefit from its experience of how to target those groups.

On funding, clearly I cannot comment on a letter that the hon. Gentleman has seen and that I have not, but I am aware that, in the coming year, one of the key objectives of Greater Nottingham and Southern Derbyshire TECs is to obtain funds from other sectors and not just to look at Government as the one and only source of finance for training. They are not the only source. We must get away from looking down that narrow road and should consider the broader field. Certainly, small, medium and large companies outside Government consider training in a broader way, as do the further education colleges. We must also do that and accept that, as unemployment falls, funds to help the unemployed will tend to change accordingly.

Training is a partnership for all the people involved and is not just something for Government. I recognise that the Government put substantial funds into training and a great many people have benefited from that in the hon. Gentleman's constituency and in mine.

If the hon. Gentleman would excuse me, I intended my remarks to be brief. I have taken three or four interventions. I wanted to speak about Southern Derbyshire TEC rather than Greater Nottingham TEC. [Interruption.]

I thank you, Madam Deputy Speaker. I hope that the hon. Member for Woolwich (Mr. Austin-Walker) will accept what I have said and enable me to concentrate briefly on Southern Derbyshire TEC, which covers a number of local authority areas, of which Erewash is one.

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Southern Derbyshire TEC has, in many respects, had many difficult jobs to do. The region's economic profile is usual for the east midlands, but perhaps unusual for the country. Southern Derbyshire's industrial history is strongly linked with many traditional industries. The region has been at the forefront of transport development. The names of Rolls-Royce and Asea Brown Boveri Ltd. are renowned world wide. Rolls-Royce has been feeling very much the competition from around the world in its field of expertise. As hon. Members well know, ABB has felt the draught of competition as well. But there has been substantial investment in the region's traditional industries, which balances the equation somewhat. Toyota built a £700 million production plant for cars. It announced last week that it was going to build another massive car plant in the region. Although there has been a shift away from traditional industries, and employment has fallen in those industries as a consequence of technology improvements, investment has continued in the region's manufacturing industry—to such an extent that manufacturing still employs about 41 per cent. of all people in jobs in the region. The number of people in the mining industry is relatively small, but the number in the services sector is starting to increase.

The region's employment pattern shows marked differences from national trends. The people employed in the engineering and textiles sectors amount to 22 per cent. of people working in the region, compared with a national total of 11 per cent. As with Nottingham, many of those people are employed in small businesses. The latest calculation showed that 83 per cent. of firms employed fewer than 10 people, which illustrates small business' powerful economic role, both in southern Derbyshire and elsewhere.

Southern Derbyshire TEC has been up and running for about four years, but people in the region still ask what the TECs do. One of the reasons why that question is asked is that the use of the word "TEC" is synonymous with so many of the old technical colleges, but another reason is that the TECs' involvement is wide and various—it takes place through so many other organisations—so it is not necessarily known that they are involved in a particular area.

Southern Derbyshire TEC has been involved in training people from school age right the way through to the older age group. It has been involved in setting the region's economic revival on a sound footing with such developments as Derby Pride, which is similar to the Nottingham city challenge scheme. It has been involved in the single regeneration budget and in putting the Derby and Derbyshire chamber of commerce on a sound footing. The TEC, therefore, has a wide involvement in the local economy; it is there not only actively as a trainer, but as a force to move and shake. But the worth of an organisation is not measured just by calculating how much is put into it. It must be measured by what comes out as well. The hon. Member for Woolwich is agitating dreadfully. I shall give way.

I am slightly surprised at that. The hon. Gentleman may not be aware that, out of the 82 TECs in the country, Southern Derbyshire TEC comes second in
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helping unemployed people find jobs. Last year, it helped some 2,000 people find work and the figure is rising substantially. When considering some of the other criteria against which a TEC's performance is judged—what is happening to the people whom it trains—we find that Southern Derbyshire TEC comes sixth in helping young people obtain qualifications. Last year, 1,340 young people gained qualifications. That information is from Southern Derbyshire TEC. It is more accurate than the information he received from the hon. Member for Peckham (Ms Harman), the Opposition spokeswoman on employment.

I give this TEC the credit which does not seem to be coming from Opposition Members. All the hard work that it has done means that, overall, it is in 15th place among TECs. It is often common for people to think of Derbyshire solely in terms of the green and pleasant land of the Peak district, but southern Derbyshire is not like that. It is far more of a traditional industrial region. The Salford index measures the quality of life in the regions covered by TECs. Against that index, Southern Derbyshire TEC ranks about 30th, so it is placed just above half way in terms of the quality of life in the region. For it to be in 15th position when it comes to ensuring that those whom it trains find jobs and go on to do what they want to do is a creditable performance of which it is justly proud. It helps the people in the area.

I intended to make a few brief points about Southern Derbyshire TEC. I have been talking for about 15 minutes and have taken half a dozen interventions. Our constituencies are a long way apart and, if the hon. Gentleman will forgive me, I should like to continue with Southern Derbyshire TEC.

Another aspect of the work of TECs, which has not really been touched on so far, is helping new firms get off the ground. That is fundamental to growing jobs in an area. The Government do not create jobs by waving a magic wand. The job creators of the country are businesses. The figures provided for me by my local TEC show that in the last year for which it has records—about six or seven months ago—it helped to start more than 400 firms, which is twice the number it got going two years previously. It monitors those firms to see how it can continue to assist them and keep them growing. Helping new firms get off the ground and encouraging existing companies to grow is fundamental to ensuring a strong economy and more jobs for the people of southern Derbyshire.

The recent unemployment figures for the area covered by Southern Derbyshire TEC show a substantial reduction. In my area, unemployment has fallen by nearly 16 per cent. compared with this time last year and by about 20 per cent. since 1992. There are similar falls in unemployment in the other constituencies and local authority areas covered by the TEC. That shows how jobs are being created in the area and how well the TEC is performing in training people to take up the jobs that are provided.

Another aspect of the TEC's work is the Investors in People award, which was touched on earlier. It has received the extra cash for good performance, particularly
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when it exceeded targets for finding jobs after training for people with disabilities and for people from the ethnic minority community. I emphasise the phrase "exceeded targets for finding jobs after training" because that is what training is all about.

I make two points relating to the Southern Derbyshire TEC and to TECs generally. First, there was an amalgamation of Southern Derbyshire TEC with the Derby and Derbyshire chamber of commerce. That amalgamation was necessary because the chamber of commerce was in financial difficulties, which was not to the benefit of the business community and the long-term prospects of businesses in the area. However, I am concerned about amalgamations in general.

I hope that any proposed amalgamation between a TEC and a chamber of commerce is considered carefully. The independence of a chamber of commerce is vital for the business community. The jobs done by TECs and by chambers of commerce are not wholly separate from each other, as they obviously cross over at the edges. However, I do not think that they will benefit from being wholly intermingled. There may be areas such as mine where it is necessary to do just that, but as a long-term policy for the business community, as represented by the chambers of commerce in this country, it would not benefit them especially well.

My second point relates to the ability of partnerships set up by the TEC. The business link is now starting to move well in the local area, as is the link between schools and companies and the involvement of lecturers with businesses. Those areas are all showing improvement and they require money. I am concerned that we are looking at capping the amount of surpluses that a training and enterprise council can generate. For example, the allowable profit margins on TEC programmes are capped at or around 7.5 per cent. I am not advocating dependency on the Government for those economic partnerships because I recognise that there must be an all-round contributory effort. However, in the early years of economic partnerships in particular, and the other partnerships that develop and assist in an area, there may be a need for more financial assistance than at later times. I hope that it will be possible at some time to look again at those allowable profit margins and at some of the constraints on TECs relating to their involvement in economic development in an area. By looking again at those rules, perhaps we will continue to assist job creation, which I am sure is what everyone wants to see.

I have about five minutes, which is not long in which to accuse the Government of, at the very best, a lack of financial rectitude, and, at worst, of fraudulent trading in relation to South Thames TEC. My argument is that the Government should fund South Thames TEC and every other TEC that finds itself in similar difficulties to discharge the debts that they incurred up to such time as creditors were put on positive notice that the TEC would not be able to discharge its obligations.

The Government set up South Thames TEC in 1991 and it went bust just before Christmas 1994 with debts of several million pounds. For instance, it owes over £800,000 to my local Lambeth college—5 per cent. of its budget. It owes money to many local schools, including primary schools, as well as to organisations for the
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disabled and Age Concern. It left in the lurch 6,000 trainees when it went bust. As I have said, the Government should meet those debts until such time as people were put on notice about those losses.

I accuse the Government of acting in the sort of way that deserves to put them on the BBC programme "Face the Facts". I accuse them of, in some ways, acting no better than those who run disreputable phoenix companies and conmen and spivs who use the method of a limited company to deprive creditors of what is due to them. Can one imagine what would happen if ICI or one of our leading banks was to wholly fund a subsidiary company, as almost the sole source of its funds, and let that company go into liquidation leaving the most vulnerable people to pick up the pieces and face the debts?

What is more, the Government have not simply walked away from this. If there is any wreckage left in the shipwreck of South Thames TEC, the Government are grabbing it as the preferred secured creditors of that organisation. That is absolutely disgraceful. It is an example of a complete lack of financial rectitude.

The matter is even worse than that. I believe that the Government are liable for fraudulent trading under section 213 of the Insolvency Act 1986, which makes any person who is responsible for creditors being defrauded responsible for those debts in full. Why do I say that? The Government said that this was a private enterprise matter, run by private enterprise. It was not. The director, Mr. Hansen, was a former civil servant. He was in my private office when I was a Minister at the Department of Employment.

When the financial director left in August 1994 the Government knew that the TEC was in difficulties. They knew from their financial inspections between August and November 1994 that something was seriously wrong. However, they went on funding the body completely, apart from a little money from the European Union, and holding it out as discharging the Government's responsibilities. If anybody else does that, it is an act of fraudulent trading. It involves giving comfort and support to an organisation from which vulnerable people and groups—primary schools and organisations for the disabled—can derive the reasonable conclusion that the debts are being met. For the Government to grab every penny that was available from the shipwreck is disgraceful. I suppose that it is privatisation, but who would buy a second-hand policy from this Government which came originally from the Adam Smith Institute? I do not believe that any other responsible organisation would have behaved in that way.

The Government should fund the debts incurred for this reason. The TEC was not simply a trading organisation, but an organisation formed to discharge the Government's functions. One of the purposes of a Government is to look after children when they leave school, and also to educate and train people to sustain the economy. The Government have walked away from the wreckage they have created by allowing a TEC to be run badly when it was known to be in a high-risk area, and they disguised its demise in the run-up to the Christmas holiday.

I do not make the allegations of fraud, mismanagement and a lack of financial rectitude against the Minister personally, as he has come here to carry the can. I do make those allegations against the Government. I know of no creditor, from the South London Press to Lambeth college, who believes that the Government should leave
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people stranded as they have done. I hope that the Minister can say that the Government accept the same degree of responsibility for this fiasco as any other reputable organisation would accept for a subsidiary.

There is a fairly straightforward approach to measuring a TEC's performance in relation to its funding. We can measure how successful it has been in providing training which leads to new skills and in helping to tackle long-term unemployment.

To date, the results are disturbing. Nearly half of all those who have taken training for work schemes through TECs remain unemployed some six months after leaving the schemes. Nearly 60 per cent. of those leaving training for work schemes leave without achieving the minimal qualification. The root of the problem is not so much the management of TECs as the funding policy on which they are supported. Hon. Members may remember that the present funding system was described to the Employment Select Committee by Professor Bennett of the London School of Economics as "daft".

For example, demanding that TECs make surpluses from training programmes to fund enterprise schemes for small businesses was a classic case. The effect of that was to encourage TECs to cream off those people who were easier to train, thus achieving their target outcomes. At the same time, those with special training needs—those who, I would argue, perhaps deserved greater attention—were losing out, and they continue to lose out.

The danger is that the swingeing cuts that are planned will provoke mass resignations from business representatives unless the budget policies are looked at again and, I hope, reversed. Business people will become disaffected if the only function of TEC boards is to dispense state funds to pay for training schemes for the unemployed. We must remember that the central mission of TECs was that they should be employer-led bodies for economic regeneration, and that central mission will be fundamentally compromised without adequate funding support for the innovative local initiatives that they should be equipped to produce.

I shall give a quick example of my local TEC in Hampshire, the area with the highest dependence on the defence industry of any region in the country. The Hampshire TEC must develop schemes for diversification in the local economy, and has been given the task to help the workers who, in many cases, are highly skilled but who need to diversify their talents into other industries. The TEC is working well within its own abilities and resources, but it is constrained by a lack of support and, perhaps, understanding from the Government.

Is not it a fact that, like my local TEC, the hon. Gentleman's local TEC is deeply demoralised by the cut in enterprise allowance, because that stopped it from helping new businesses to start? The TEC wanted to help people to start their own business and to go on to employ other people.

I cannot speak for the hon. Gentleman's TEC, but that is certainly a key problem. There is a need for innovation in funding and a need to look beyond the immediate task of dealing with the long-term unemployed. In that sense, the hon. Gentleman and I are on the same lines.

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Given that background, it is hardly surprising that the Secretary of State for Employment reportedly said:
Some TECs lack credibility with the business community".
That is an important issue which must be addressed by the Government.

The Government continue to pursue funding cuts, with another £280 million forecast to be lost in the next two years. At the same time, funding for youth training and the modern apprenticeship schemes—vital investments in our future skills base—will barely keep pace with inflation.

The Government are proposing an increase in the percentage of training for work leavers gaining jobs from the present 36 per cent. to 50 per cent. in 1997–98, and that is a welcome, if modest, aim. We must question what appears to be the prime aim, which is reducing the average cost per job from about £6,500 to £4,500 over that same period. Improving efficiency of training for work programmes is clearly a responsible target for any Government, and I would endorse that, but withdrawing money that is saved from the budget instead of reinvesting it in better-quality high-skill training is not responsible.

British companies are already constrained by skill shortages as the economy is improving. With the United Kingdom facing widening skills gaps when compared with our competitors, it is the worst example of short-sighted short-termism not to invest efficiency savings from the improvement in the performance of TECs in the development of the high-skill base which is essential to our future prosperity. The drive for lower unit costs brings further threats to training quality.

Clearly, we all agree that the performance of TECs must improve, but without some form of regulatory system, the pressures of payment by results can encourage abuse. We have heard examples of that, and no doubt those pressures will lead to an increase in that abuse. There may be a temptation to take short cuts, and the potential for corrupt practices also increases.

There is widespread concern within industry and commerce about the validity of some of the national vocational qualification assessment techniques, and a reduction in funding will only heighten those concerns. Nothing can make that point more effectively than the Government's own forecasts for NVQ outcomes. In 1994–95, the estimated proportion of leavers of the training for work schemes who will have NVQs is 39 per cent. That is hardly a figure to get excited about, but the forecasts for 1995–96 and 1996–97 show that the proportion will fall from that low figure of 39 per cent. to some 30 per cent. in each of those years.

The vast majority of those NVQ qualifications will be in levels 1 and 2, neither of which is an intensive, high-skill qualification. NVQ level 1 is the equivalent of five GCSEs at a modest level, and NVQ level 2 is slightly better. The Government are predicting that, in the next two years, fewer than one in three of those leaving the training schemes will achieve a skill qualification of the standard of an average secondary school leaver. By no stretch of the imagination can that programme be described as equipping the country with the skills base that we need to compete in the world market. In that context, Professor Bennett was absolutely right to describe the TEC funding policy as "daft". The
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Government's failure to reinvest efficiency gains from TEC budgets in high-quality training is selling the country short.

I shall return briefly to the effectiveness of TEC funding in tackling long-term unemployment, which is a key area of the Government's policy. The economy is held back by mass long-term unemployment. Throughout 1994, the very long-term unemployed represented close to 40 per cent. of the overall total of unemployed. That is a higher proportion than at any time in the previous four years. There is no clear sign of a significant reduction in that percentage in the coming year. Therefore, the improvement in the economy has made little, if any, difference to the long-term unemployment quota. That demonstrates that long-term unemployment will not be tackled by market forces alone. We need sound, properly funded policies to develop and extend the skills base.

Some of the Government's policies have been successes, and I welcome and endorse those. The workstart pilot programmes have shown remarkable success, with employers taking on long-term unemployed people into permanent jobs. However, instead of concentrating resources and targeting cost savings on those programmes, the Government are starting more pilots. From my correspondence with the Department, it is clear to me that the Government's main aim is to reduce still further the costs of training the long-term unemployed and equipping them for meaningful employment. The schemes are training on the cheap. All the while, the long-term unemployed continue to represent some 40 per cent. of the total quota of unemployment.

There are ways in which we could tackle that problem. We could invest in benefit transfer systems to encourage employers to give meaningful training to the long-term unemployed to make them productive and worthwhile employees who can be taken on as an asset to a company. Long-term unemployment is a major challenge to TECs, but without more support and flexibility, they will lose the battle. All the while, each long-term unemployed person costs the economy £9,000 a year in benefits paid and taxes forgone.

TECs' reliance on short-term funding and the requirement that they comply with central Government restrictions discourages long-term planning and investment in high-quality training. TECs need to be restructured so that local accountability can be improved. Industry needs to continue to play a lead role. Companies must be encouraged to take responsibility in identifying and meeting local training needs, but TECs must also be more broadly based to draw in the support of small as well as large businesses.

TECs need to work in partnership with local authorities and educational and community interests. It is important to note that many small firms involved with TECs now have had no experience in training. They need to be involved to develop the knowledge and skills that go with training employees. TECs must reflect the requirements of small firms in a sector of our economy which has the greatest potential for job creation. TECs need to develop closer links with chambers of commerce to minimise duplication. They need to consult more widely with unions and local authorities.

TEC boards should be more broadly based. Members should be brought in who represent a wider section of the business community, local authorities, trade unions and the voluntary sector. We need to get a local dimension in
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our TECs. They need to have the flexibility to meet local needs. Ministerial controls on TEC funding need to be lessened so that we have TECs which are more responsive to local requirements.

We need to remove the anomalies in the financial support of different groups. Above all, TECs need rolling funding. They need to be enabled to plan for longer-term targets. They need to be able to concentrate on the provision of skills training for those in employment—one of their fundamental remits—and on giving support to new and growing businesses.

I wish briefly to reinforce the position of the Greater Nottingham TEC. Let us look at the headline figures. In the current year, the gross budget is £24 million and the core budget is £20 million. Next year, it will be £17 million. At the lowest, that can be classed as a cut of £3 million or 17 per cent. That is on top of a cut in the previous year of £3.2 million or 15 per cent. Put another way, the budget of Greater Nottingham TEC has fallen since 1 April 1993 by 34 per cent. Unemployment has fallen, but by only 15 per cent.

I am worried about the cuts, which will affect the Greater Nottingham area. I fear that the business start-up scheme will consist of counselling only and that no finance will be available. Some £1 million has been lost to new small businesses—a sector which I thought that the Government were trying to encourage. I am particularly unhappy that the local initiatives fund will not continue next year. That brings me to my key point. TEC budgets across the country were cut from a peak in 1993–94 of £1.97 billion, by 12 per cent. in 1994–95 and by 21 per cent. in 1995–96. Budgets are being cut, but TECs are doing more. As other hon. Members have said, outputs are increasing. The consequence is—this is the contradiction for TECs—that although they are doing more for less money, their flexibility and ability to meet local needs is handicapped and hampered.

If we want TECs to be engines for change, to add value to the local economy and create jobs, we have to give them more flexibility. There are ways in which that could be done without spending any extra money. TECs ought to be allowed greater virement—perhaps up to 10 per cent.—between budget heads. There should be a refocusing on European social fund contributions and how they are handled. ESF money comes in at both national and local level. There is often confusion. If we refocus that money at local level, we could obtain extra added value. I hope that the Minister will consider that point.

We ought to work towards a single training for work budget. At present, the training budget and the allowance budget are separate. They are not both managed by the TEC. Integration could provide better impact, efficiency and value for money. A range of flexibility measures could be taken which would not cost money. They would give TECs the flexibility to act. The Minister ought to listen to this. He ought to listen to private sector TEC directors, who say to me that they are in a Catch 22 system. They want things to happen. They want change in their area, but they do not want to be merely the deliverer of the youth and adult training programmes. They want to do more and to add value to their area. They can do that only if they are given flexibility.

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I wish to raise a point about a local issue affecting my North Nottingham TEC. If the Minister cannot answer today, I hope that he will write to me about it. As part of its adult training for work scheme, the TEC runs a excellent scheme called jobskills. In the past three years, 6,000 people have been through it. They have had employed status. In October, the Department of Social Security's central adjudication service ruled that participants on the scheme were trainees. Given that such trainees pay national insurance contributions, that seems most odd. They had employed status in the past, which enabled them to claim family credit. Participants or potential participants now cannot claim family credit so fewer people now go on the scheme. Far from being a successful scheme, the rate of take-up is now 20 per cent. down.

I understand that the Minister's officials are talking to other Government Departments about the matter. It is a good scheme, and it would be easy for the Government to resolve the matter. I hope that they will look into it and take it forward.

TECs are important. They are about investing in people, in education and training and in the future. We want to compete with the best in the world—with Japan and Germany. Let us invest in the TECs, give them flexibility, move forward and work for real change if and when we come out of the recession.

I welcome the opportunity of the debate provided by my hon. Friend the Member for Nottingham, South (Mr. Simpson). It is a pity that many Opposition Members who had important speeches to make—there is a great deal of concern on this side of the House—were not able to speak because of shortage of time and the padding speech by the hon. Member for Erewash (Mrs. Knight). That is a shame.

The Opposition believe that training is vital for everyone. High skills mean reasonable prospects and low skills mean insecurity and, all too often, the dole. Everyone knows that one needs skills and one needs to be constantly upgrading them to get a job and to get on in a job. Everyone also knows that these days unemployment is not so much about why one lost one's last job, but about why one did not get the next. How long it takes to get a job depends on one's skill level. There is a clear correlation between lack of skills and long-term unemployment, so high skills are vital for everyone.

High skills are also essential for our economy as a whole. We need them to compete in today's global market, as is well recognised by businesses in this country and by other countries with more successful economies. Before the advent of information super-highways and the dramatic improvements in transport, the success of an economy, and what our economic success was built on, was access to capital and raw materials. Now, capital can cross the world at the touch of a button and raw materials can be moved anywhere.

The skills of a country's people are what gives it its competitive edge and it is because skills are so important that the wholly inadequate state of training in Britain today is so disastrous. This country is second from the bottom in the Organisation for Economic Co-operation and Development international skills league table and we have four major problems, which I shall highlight and to
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which I want the Minister to respond. Those are: cuts in training courses, the poor quality of training, the collapse of the South Thames TEC and the inadequacy of training provided by employers for their employees.

There is a clear link between long-term unemployment and lack of skills, so why have the Government cut the training for work programme, which is intended for unemployed people and is supposed to give them the skills to help them get back into work? Last November, the Budget cut the training for work programme by a quarter. Those cuts will condemn the unemployed to even longer on the dole.

By the Government's own admission, there will be 55,000 fewer training for work places in the year beginning in April than there were in the current year. The Secretary of State for Employment says that, despite the cut, more people will come out with qualifications and jobs at the end of the programme. His plans, which he believes and says will improve the efficiency of training for work, do not necessitate cuts. He should be aiming to improve the quality for all people on training for work, not for 55,000 fewer trainees.

I reinforce the argument of the hon. Member for Eastleigh (Mr. Chidgey) about training for people with special needs. There is mounting concern about such training. By definition, they are the people who have the most difficulty finding and keeping jobs. They also need greater support during training. That must be done, otherwise they will simply be thrown on the scrap heap and their problems will be made worse.

The inflexibility of output-related funding means that it will flow to the quickest results, which means that training will go to those who can achieve and get qualifications the quickest and who can find a job the easiest. That institutionalises a bias against those who need help most—those with special needs, the long-term unemployed, who have most difficulty getting jobs, and women who want to train and work in occupations that are traditionally male. In short, it means that training for those who pay the bills fastest will take priority over training for those who need the help most.

On the variable difference between regions, the Government's figures show dramatic and unacceptable differences in funding and achievement between different parts of the country. Let me take the Minister through some of his figures and hear his response. First, on funding, let us look at training and enterprise council spending per unemployed person in the area. The TEC with the lowest funding, North London TEC, gets only a quarter of the amount that the Government give to the highest funded, South and East Cheshire. The latter gets £1,600 funding per unemployed person, whereas the North London TEC gets only £476 per unemployed person.

The top five best-funded TECs are all in areas that are represented by Conservative Members of Parliament: Cheshire, East Lancashire, Milton Keynes and Buckinghamshire, Lincolnshire and Suffolk. The bottom five are all in areas represented by Labour Members of Parliament in London. The Minister has some explaining to do and I hope that he will take the opportunity to do so today. Whether one gets training and the quality of that training should depend on one's needs and not on where
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one lives. It should certainly not depend on whether one lives in a Tory area that is favoured by the Government, or a Labour area that is not.

On success rates, the figures must be examined with some care because the Government's definition of a success rate begs the question of how difficult the task was in the first place. Let us consider the Government's figures. Overall, the success rates for training for work and youth training are lamentable. As my hon. Friend the Member for Nottingham, South said, 58 per cent. of youth trainees do not even complete the scheme. Half of those who complete it do not find a job at the end and half have no qualifications at the end of the scheme.

On training for work, only one in four trainees leaves to go to a full-time job. Those figures are lamentable, but on top of that there are very worrying regional variations, as 42 per cent. of trainees in North Nottinghamshire TEC programmes leave to go to full-time work—less than half—whereas in the North West Wales TEC and the Essex TEC areas, only 16 per cent. find full-time work when they leave.

What is especially worrying about the training for work and the youth training programmes is the clear gap between the success rates for black and white trainees, and we must have a response from the Minister on that. Although the results, both on training for work and youth training, are very poor, they are doubly bad for people from ethnic minorities. In London, 45 per cent. of white youth trainees leave to go to a job—less than half—but only 18 per cent. of black youth trainees leave to go to a job, which is less than one fifth. Something is badly wrong there. Government training is failing black people—the people who find it hardest to get a job. Is it any wonder that 60 per cent. of young black men in London are unemployed? Training is failing them. The picture is just as bleak on the training for work scheme for unemployed people. Overall, 24 per cent. of white people on such schemes leave to get a full-time job, but only 18 per cent. of black trainees get a job at the end of their training.

The funding has been cut, results are patchy and training is failing—it is failing black people in particular—but there is worse to come. The South Thames TEC has gone bankrupt and I totally support all the comments made by my hon. Friend the Member for Norwood (Mr. Fraser). Some colleagues, who represent Lambeth, Southwark and Lewisham, have been present for the debate and are very concerned about that TEC.

The Government allowed the South Thames TEC to go bankrupt and there is now no training organisation for Southwark, Lewisham, Lambeth or Greenwich. Centec and Solotec, which were supposed to pick up the pieces, have not done so. There is no contract for training in those boroughs and all the training schemes are in limbo. Millions of pounds are owed to providers who have paid out on training allowances for unemployed people on Government training schemes. But, when the TEC collapses, the Government jump back and say, "It's nothing to do with us. Everyone else will have to pick up the bill." That is a disgrace.

Southwark college is owed £400,000 and the Government say, "That's just your hard luck." Springboard Southwark, a small private training organisation, is owed £170,000 by South Thames TEC and the Government say, "Nothing to do with us." But, it is something to do with them. They set up South Thames
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TEC and it was running Government training schemes, so they cannot wash their hands of responsibility for training simply because they have allowed it to go wrong.

The Government have also failed to ensure that employers train. The old training levies have been abolished for all except the construction industry and many employers do not train at all, while some train only their top managers. An invaluable research project commissioned by the Union of Shop, Distributive and Allied Workers from the university of Leeds showed that, even where employers spend money on training their employees, most of it is wasted. Two thirds of employees said that the training did not help them to do their job, and half said that training did not give them skills that would help them in their future career development.

New attention must be paid to training by employers. All employers should be required by law to contribute to training their work force, and employees should receive training that they find useful. The heart of the problem is that the Government do not believe that they have a role in providing training or ensuring that businesses train. They believe that it should all be left to the market, but our people and the economy are now paying a price for that failed ideology.

It is traditional to congratulate the hon. Member who has gained the opportunity to discuss an issue in an Adjournment debate, and I willingly congratulate the hon. Member for Nottingham, South (Mr. Simpson) on that. However, that is where my congratulations end, because rarely have I heard such a diatribe, punctuated only by headlines, allegations of fraud and corruption by Ministers, civil servants and anyone else who happened to get in the firing line. His speech was totally dissociated from the reality of what is happening in training. It was in stark contrast to that of the hon. Member for Sherwood (Mr. Tipping) who, while clearly concerned about funding aspects, at least put forward some carefully thought-out proposals, to which I hope to respond briefly in the few moments that I have to reply.

This debate takes place against the background of TECs having been in operation for about four years. In that time, the benefits of changing the method of delivering Government training programmes and the range of other TEC remits have clearly borne fruit. Since the instigation of TECs, the proportion of young people leaving training programmes with a recognised qualification has doubled to 67 per cent., which is considerably more than the 50 per cent. which the hon. Member for Peckham (Ms Harman) bandied about, having grasped the figure out of the air. The cost of achieving a qualification has fallen by 22 per cent., which clearly benefits everybody concerned, and the cost of getting adult trainees into jobs or further training has fallen by 25 per cent.

Although I listened with interest to the comments of the hon. Member for Eastleigh (Mr. Chidgey), his point about reducing the cost of getting a job was one not of funding but of mathematics. If the number of people getting jobs increases, the cost per job automatically declines.

A second aspect of the debate is money. This year, TEC budgets nationally, excluding allowances for training for work, will rise by some £19 million in cash terms, from
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£1,100 million to £1,119 million. In the next two years, expenditure is expected to rise to £1,217 million and £1,236 million respectively. I stress that those figures exclude training for work allowances. It is important to make that distinction, because TECs have no control over allowances. They are set by my colleagues in the Department for Social Security and are not part and parcel of the budget over which a TEC can exercise flexibility.

Within those totals, the increase for young people in modern apprenticeships is £117 million, which is a considerable increase in expenditure. I admit that the training for work budget has been reduced by some 13 per cent. when the allowances aspect is excluded, but what is important is the fact that we are keeping up output. It is planned that 4 per cent. more people will get jobs in the coming year out of the training for work programme. We aim to increase the current 33 per cent. to 50 per cent. by 1997-98, as none of us believes that 33 per cent. is satisfactory. Hon. Members have referred to the low achievements of the training for work programme and I happily accept that criticism, which is why we are concentrating on driving up the result to at least 50 per cent. I was encouraged by the suggestion by the hon. Member for Eastleigh that that target was not high enough. It may redouble our efforts to look more closely at the target.

A further point about budgets applies particularly to the Greater Nottingham TEC, Southern Derbyshire TEC and many other TECs to which reference was made in the debate. As no contracts have yet been signed with TECs and all the figures that have been quoted are under discussion, it would be wrong of me, at this stage, to comment on individual TECs' budgets or contracts that have not been finalised.

Linked to that point is the fact that the total figure of £1,119 million includes considerable sums that are not allocated at this time through the contracts being discussed, the most significant sum being £41 million from the European social fund. That money, for which TECs are competing, will come into the frame. I know that Greater Nottingham TEC is competing for it, but I cannot yet foresee whether it will receive the money.

Another aspect is known as the work-related further education budget, which is some £60 million. None of that is disappearing from the training budget and £30 million has now been redirected to colleges, so although it may have come out of TECs, it has not come out of training. The other £30 million now goes into competitiveness and development funds for which TECs will bid, so it comes back into the TEC equation. In addition, some regions are keeping back small sums as contingency funds to respond to individual TECs' specific needs or exceptional performance.

Another important point is about the single regeneration budget. I was disturbed to hear the hon. Member for Nottingham, South accuse civil servants of stealing money. That is a horrendous, scurrilous accusation to make against civil servants, who judged the bids for the SRB extremely carefully. I well understand Greater Nottingham TEC's dissatisfaction about achieving no benefit from the SRB this year, but it was clearly because regional office officials believed that better bids were
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made. Nothing stops further bids being made in the second round this autumn, when an extra £40 million will be available.

A point made several times in the debate is that the move towards output-related funding will somehow penalise those with special needs and difficulties. Hon. Members naturally draw that conclusion when they do not bother to find out what goes on, and I am afraid that that was clear in the case of the hon. Member for Peckham, with her diatribe on that subject. In reality, we have protected those with special needs. First, despite the reduced numbers overall in the programme, which we readily accept, we are ensuring that the number of starts by people with special needs will be maintained and will increase as a proportion of the total. Secondly, the funding allocated to people with special training needs is substantially enhanced. I do have time to go into all the details, although I am happy to provide them. In many cases, funding is double the amount that goes to someone without special needs. It must be recognised that, in this contract round, measures have been taken to protect those with special needs.

The hon. Member for Sherwood wanted me to respond to two or three points. The first was about rising outputs, the need for flexibility and greater virement possibilities. We will consider those matters. I am anxious to ensure that TECs have all the flexibility that we can possibly give them, commensurate with our accountability to the House for public money. I was interested in what he said about a single training for work budget. I also agree that TECs are not just for deliverers of training—they have a whole enterprise culture to develop.

I am rapidly running out of time, but I should like to reply briefly to what the hon. Members for Norwood (Mr. Fraser) and for Peckham said about South Thames TEC. I have put it on record in an earlier Adjournment debate that no trainee has been left in the lurch. Every trainee has been able to continue his or her programme. It was complete nonsense for the hon. Member for Peckham to suggest that we have ditched trainees. We have made the future of training programmes absolutely central to our policy.